Bill filed to empower OfReg to upend fuel deals

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Key takeaways

MP Chris Saunders filed a bill to give OfReg power to review fuel supply contracts.
The legislation targets contracts held by CUC on Grand Cayman and Island Energy on the Sister Islands.
Saunders argues power providers lack incentive to bargain for better deals, making regulatory oversight necessary.

Independent opposition MP Chris Saunders has filed an amendment bill in parliament to give the utilities regulator the power to review all fuel supply contracts, determine if they are still in the public’s best interest, and where necessary, provide notice of a retendering process. This would directly impact fuel contracts with CUC on Grand Cayman and Island Energy on the Sister Islands.

OfReg has had a challenging relationship with CUC, especially over the transition to renewables, and it isn’t yet clear if the government intends to support this effort to upend the deals the power companies have made to buy fuel in the current extremely volatile market. At this stage, there is no indication as to whether or not Saunders, who also filed a bill that would weaken the National Conservation Act, has persuaded any other opposition members to support him in this endeavour.

Review powers and market scrutiny

The bill would allow OfReg, on its own initiative or on a direction of the Cabinet, to review any fuel supply contract held by a power provider to determine whether it continues to serve the objectives set out in the law and if it offers the best value to consumers and the public purse. The regulator would be able to scrutinise a contract awarded following a competitive tender to see if the pricing, terms or duration of the contract are materially inconsistent with prevailing market rates for comparable fuel supply arrangements.

This includes international price levels, the length of time the contract has been in force without retender, and any evidence of collusive practices, undue enrichment or abuse of a dominant position by the contract holder in connection with the contract. OfReg could also examine the contract’s impact on fuel costs for consumers and public expenditure.

Current fuel arrangements and debates

CUC buys the fuel for its diesel generators from wholesalers Rubis and Sol in a 60-40 split respectively. The most recent contract began in 2024. CUC cannot profit from fuel, and the cost is passed directly through to customers.

The bill aims to ensure that the power companies get the best possible price, though CUC argues that it already does this. However, Saunders told the Cayman Compass that the power provider, which also owns the grid on Grand Cayman, has no incentive to bargain for a better deal, and so the regulator should ensure that it does. It is understood that OfReg supports the proposed legislation.

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